Building a Solid Foundation

The most extraordinary structure is only as strong as it’s weakest link. The same principle applies in business. The higher up the leadership chain that weakness exists the more likely the organization is to crumble.

That’s why the companies that are succeeding in the market these days are controlled by innovators that aren’t afraid to take risks, but also understand the limitations of competition. By virtue of having many historically family-operated companies, the convenience store and petroleum industry is certainly above other retail segments in terms of talent at the executive level, but as other retailers look to fulfill their need for tomorrow’s leaders, the industry becomes prime recruiting ground. Blockbuster, for example, has long recruited employees from companies like Chevron and Circle K. Today, it’s run by former 7-Eleven President and CEO Jim Keyes.

Service to the FleetFor Fairburn, Ga.-based Green Oil, which operates five Greenway stores and distributes fuel to another 114 units, creating new profit centers is part of the company’s rich 85-year history. The company owns about half the properties it distributes to and recently launched a check-cashing business. But it’s the investment in a fleet fueling business that’s getting the industry’s attention.

Green Oil’s fleet service is not your typical fleet fueling operation. The company uses its tankwagons, which distribute to branded marketers by day, to fill up delivery trucks onsite at several major product distribution companies at night. The companies, which include a major national grocer, which Green Oil declined to identify for competitive reasons, and Royal Foods, the primary supplier to Applebee’s restaurants and numerous public school systems around Georgia.

The business has grown to about a million gallons annually, said Ray Potts, controller of Green Oil, and the architect behind the fleet business. The tankwagons roll seven days a week, 365 days a year and Potts, often joined by his son Ryan, is one of just three employees to execute this service.

On a typical evening, Potts, whose family has three-generations of loyalty to Green Oil, sets up the tankwagon at Royal Foods’ distribution center and fuels more than 60 trucks, in addition to checking vitals like fluids and tire pressure. The grocery account, handled by two full-time drivers, fuels 375 trucks.

"This is not easy work by any means, but it is very profitable and has the opportunity to grow as much as we would like it to," Potts said. "The business carries a very high margin. The margin at our convenience stores is about a dime. The margin on the fleet business can be 25 to 50 cents depending on the services we are providing."

At Royal Foods, for example, Potts records each truck’s fluid levels then enters the information into a proprietary software system, which he developed, and transmits it daily to the food distributor. "They want complete vehicle information in a format that can be easily downloaded into their back-office system," he said. "So we configured our software to meet their needs. It is a very sophisticated system that other fleet services must consider before they think about investing in a fleet business."

Aided by Big BrandsOne of the key’s to Green Oil’s success is its access to supply. The multi-branded jobber distributes BP, Chevron, Shell, Texaco and Exxon fuels in addition to owning an 80,000 gallon bulk storage plant near its Fairburn headquarters. Plus, Potts said, it’s centrally located near the larger oil companies’ bulk storage facilities enabling it to keep its own fuel storage costs down without jeopardizing its access to supply. This was extremely critical in the weeks following Hurricane Katrina.

"After Katrina, there were companies doing fleet fueling that couldn’t fulfill their contracts. A lot of fleet fuelers aren’t jobbers. They have contracts at the rack and once that dried up, they couldn’t serve their customers," Potts said. "Since we have so many contracts and are a branded jobber, we had many access points that running out of fuel wasn’t a concern for us. Plus, we had the storage plant as a backup."

That’s a key distinction for Green Oil that Pott’s skillfully helped create, and the trucking fleets have noticed. The only thing keeping Potts from growing the business, possibly doubling or even tripling it, is finding the right drivers to meet the grueling demands of the job and purchasing new tankwagons. "To say this requires a commitment is an understatement," he said. "We have to execute fueling services every day without exception. That means holidays, rain, snowstorms, whatever. There are no days off."

But even with that description, Potts is being modest. This work takes about seven hours to complete, is often done in the dark of night with fuel handlers wearing headlamps and hauling around a thick inch-and-half fuel hose from truck to truck. Each vehicle must be tracked down one at a time regardless of whether it is where it is supposed to be on the lot.

Despite developing the fleet program and growing it into a successful standalone business, Potts ensures its ongoing success by staying in the trenches. "We got some of our accounts because other fleet fuelers couldn’t keep up with the pressures of the job. I won’t let that happen here," Potts said. "As long as our name is on the truck and I’m overseeing the business, it will get done to everyone’s satisfaction. The way I see it, there is no room for failure."

Infrastructure InvestmentsFuel investments aside, achieving economies of scale and growing the retail network is the order of the day for chains preparing for future growth. Take Rutter’s Farm Stores, which, like Green Oil, is family-owned and operated. The 55-store chain, based in York, Pa., is making a bold statement by investing $55 million in 2008 to build 10 new stores and 11 car washes. The expansion is taking the company into three new Pennsylvania markets, said company President Scott Hartman.

"The nature of the business is constantly changing requiring that companies keep getting bigger and develop higher volume locations," Hartman said. "That is our model, but it’s not something that can be done overnight. There is a lot of information to consider ranging from financing to finding good employees to promote the brand. Our current growth plan has been in the works for close to four years."

With Hartman, Rutter’s is guided by a savvy industry veteran that oversees a diversified portfolio that also includes a dairy company and a real estate investment firm. It can trace its retail roots in central Pennsylvania back to 1921.

Hartman’s leadership and commitment to innovation are evident by his actions. For example, he was among the first in the industry to embrace technology as a means of growing his business, then fervently encouraged others to do the same. When the company decided foodservice was going to be among its core offerings, he went on a tour of stores in Europe and Asia to observe firsthand how they overcame key operating issues like daily distribution, food preparation, new product development and marketing.

While it sounds simple, many companies are willing to cut corners. "It’s my belief that you have to get out there and see what other people are doing for yourself before making costly investments," Hartman said. "This is especially true when dealing with your competition. We compete with great operators like Sheetz, but good competition should make you better; it’s how we benchmark ourselves. There is always going to be someone to compete with, so it’s our responsibility to be the best chain we can and excel in the areas we operate. It’s what our customers expect and our highest priority."

New York, New York

Like Rutter’s, Quick Chek is making the bold move of expanding into unfamiliar territories. When the Whitehouse Station, N.J.-based operator of 112 stores recognized an underserved market, it pounced on the opportunity, even though it had to cross state lines into New York to do so. This was not as easy of a move as it sounds. For example, it had no relationship with the local zoning boards–never an easy step when building new units. Then it had to set up a distribution network to ensure there was no drop off in its trademark outstanding service.

Dean Durling, Quick Chek’s president and CEO, carefully weighed the options by first considering the upside. For one, New York’s Hudson Valley region is extremely fragmented in terms of retail outlets and has very few convenience stores or supermarkets. For many households, the nearest supermarket can be a several mile drive. That presented a big opportunity to provide fill-in grocery shopping and its burgeoning fuel program. Plus, there were not a lot of fast-food restaurants. This created another opportunity to capture customers for meal occasions at all three dayparts.

The other thing Quick Chek had going for it was demographics. Many residents are daily commuters into New York City, which is about 40 miles south. Quick Chek’s advertising strategy, which covers both radio and print, includes New York City increasing the odds that consumers had already been exposed to the Quick Chek brand and its retail programs, like its 20-minute coffee freshness guarantee.

"We believe we are the best convenience store chain in New York and New Jersey so when we were looking for new areas to grow that were familiar with our brand and had similar demographics, New York was the obvious choice," Durling said. "It’s a great market with a growing population, and it’s underserved."

Durling’s leadership came to the forefront during the recruiting process to find the right employees to man the frontlines. To prepare for the New York grand opening, each new hire was formally trained at the company’s headquarters in Whitehouse Station and personally met with both Durling and Mike Murphy, the chain’s senior vice president.

"The staff was very appreciative," Durling said. "Many of them came to me and said, ‘We’ve never worked for a company that went out of its way to make us feel so valued.’ That’s just the message we want to send to all our employees."

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